LIHU’E – The seller and potential buyer of Kaua’i Electric are discussing issues raised by Kaua’i residents and governmental entities about the proposed sale of KE. But whether or not that means the two parties are negotiating a lower sale
LIHU’E – The seller and potential buyer of Kaua’i Electric are discussing issues raised by Kaua’i residents and governmental entities about the proposed sale of KE.
But whether or not that means the two parties are negotiating a lower sale price is a matter, at this point, of pure conjecture.
Money matters – including the sale price of $270 million and the debt financing such a sale will mean to would-be purchaser Kaua’i Island Utility Cooperative (KIUC) – are at the heart of opposition to the sale. The issue surfaces in the position statements of federal, state and county officials, and in the sentiments of many Kaua’i residents who feel the sale is not in the best interests of the people of this island.
But with a sales agreement for that $270 million up for a state Public Utilities Commission decision as early as the first part of next month, is negotiating a lower price at this point legal or practical? All Gregg Gardiner, chairman of the KIUC board, would say is that the buyer and seller are discussing many of the concerns raised by public and governmental agencies.
“The three intervenors all make comments about price, and the community’s made comments about price,” noted Gardiner. “So we’re looking at those issues. We’re talking to the seller about all issues.
We’re talking to the seller about everything.
“We took everything that the intervenors said and made a list of all those items. And we’ve taken a list of all the things that the community has said, and that they had talked about, and made a list of those items, and we’re working through all of those things.
“We have a contract with the seller at $270 million, but we’re talking to the seller about everything.” The utilities commission, which must approve the sale for it to be legal, could make its decision as early as next month, some parties predict.
But federal, state and county entities agree with many Kaua’i residents that the sale price – some $100 million above the so-called “book value” of KE’s assets – is too high, placing ratepayers who already have one of the highest electrical rates in the U.S. at risk of even higher rates.
“I think it’s obvious to everyone that the price is significantly too high,” said Wally Rezentes Sr., administrative assistant to Mayor Maryanne Kusaka. “I can’t see the (utilities commission) approving it. If I’m right, I think they need to reconsider the price.” Rezentes and Ron Kouchi, chairman of the County Council, went to Washington, D.C. recently to discuss if low-interest federal loan funds earmarked for KIUC to finance the sale could be available to the county or another entity should the commission deny the pending sale.
“We have to protect the people’s interest in whatever happens in that sale, so we have to take some kind of responsibility in the event that things don’t work out in what we feel is the public’s interest,” Rezentes said.
“And we feel this sales price is definitely not in the public’s interest,” he added. “I don’t think our position will change without a significant, significant price reduction.
“I think the obvious question right now is, What is a fair price? I don’t see anybody on the table with that number yet, or how they arrived at it.” He said Kaua’i native Dennis Yamada, commission chairman, has said he will act on the application before it, unless a dramatic change in the sale price or application takes place.
“We were gathering information as to what the alternatives were, if any,” in the event the sale of KE isn’t approved by the commission, Kouchi said, and to find out the status of the $113 million loan appropriation which, at the time of Kouchi and Rezentes’ visit to Washington, D.C., was still before the U.S. Senate.
And is condemnation-in which the county would condemn KE’s assets on the island and purchase them from the seller – one of those alternatives? “That, legally, is always an option,” Kouchi said. But an unfriendly condemnation proceeding between a municipal entity and an electric company in Santa Fe, N.M. took five years to complete, he said.
“I don’t know how viable an option that is,” Kouchi said. “But it would be untruthful to say that isn’t possible. It certainly is (possible), legally.” There have been no discussions between the county and Citizens Communications, KE’s owner, as there is an active sales agreement on the table between KIUC and Citizens Communications. Any discussion between Citizens and the county would put Citizens in a breach-of-contract position, Kouchi said.
While governmental agencies and the public have been focusing on the sales price and terms of the sale itself, very little discussion took place regarding what the next step would be if the commission does not approve the sale.
“It certainly prompted us to start doing some research and be in a position to say that these may be some of the alternatives available to us. And that research just continues,” Kouchi said.
He doesn’t think anyone has a firm fallback plan (other than Citizens Communications, which is committed to selling KE to someone) should the commission reject the sale.
Gardiner remains upbeat about the possibility of KE becoming a nonprofit co-op.
“I’m absolutely confident that the co-op model is the very best thing for Kaua’i, that in the end Kaua’i residents will be much better served under a co-op model,” Gardiner said.
“We appreciate all the intervenor statements. We are analyzing them,” he continued. “We’re looking at them, and we’re talking with the seller. We appreciate all the community input and community concerns. There seems to me to be a strong consensus in the community that the co-op’s the right way to go.” He praised the efforts of U.S. Sen. Dan Inouye (D-Hawaii) in securing $113 million in low-interest, federal money to finance the deal.
Inouye “worked very hard on behalf of KIUC and the county to make sure that money was protected. I appreciate his continued support,” Gardiner said.
Kouchi relayed his thoughts on how the commission may rule.
With the state consumer advocate, the U.S. Department of Defense “and the county’s people all pretty much singing the same song, it is certainly an uphill battle for KIUC and Citizens to have this approved,” Kouchi said. “If that signal is that clear, what is not clear to me is, can Citizens and KIUC come up with a different number? And if they can, then what do we do next? Do we amend our findings” if the sale price comes down?
Staff writer Paul C. Curtis can be reached at 245-3681 (ext. 224) or pcurtis@pulitzer.net
